Asbury Park Press

Verizon New Jersey Approved for Only 14.4 Percent Rate Increase

Asbury Park Press — Monday, April 5, 2004

By David P. Willis,
Asbury Park Press, N.J. Knight Ridder/Tribune Business News

NEWARK, N.J. — The state Board of Public Utilities yesterday didn't give Verizon New Jersey the answer the local telephone giant wanted to hear.

Verizon had asked for a 58 percent hike in the wholesale rate that Verizon charges its competitors, such as AT&T Corp., to lease its network to offer local telephone service to consumers. That would have pushed the price from $12.61 per line, per month, to $19.89.

The BPU agreed to raise the rate instead by $1.82, or 14.4 percent, to $14.43. "We are taking a middle ground position," BPU Commissioner Frederick F. Butler said.

Verizon yesterday lashed out at the BPU's decision, saying it threatened the telephone company's ability to invest in its network in New Jersey.

Competitors have access to Verizon's network at prices that are below cost, the company said. The BPU's 'baby-step increase' does not seriously address the issue, Verizon New Jersey President Dennis M. Bone said in a statement.

"The overall investment climate is among the factors any corporation weighs in deploying new technologies such as fiber optics for small businesses and homes," Bone said. "Today's decision assures that New Jersey will remain at the back of the line when it comes to new investment dollars."

Verizon cut its investments in New Jersey's infrastructure from $1.1 billion in 2001 to $449 million last year, blaming the low wholesale prices.

The $12.61 rate was set by the BPU in July 2002. Shortly afterward, AT&T Corp. and other competitors entered New Jersey's local telephone market.

The BPU held hearings on changing the rate in February after the Federal Communications Commission clarified its position on wholesale rates last year. The board changed some aspects of the rates yesterday. making them consistent with FCC guidelines, BPU President Jeanne M. Fox said.

Verizon's opponents, including AT&T Corp., said an increase would threaten competition in New Jersey.

About 625,000 residential customers, 16 percent of the market, have switched local service from Verizon to another carrier, saving as much as $217 million a year on their bills, according to a study released last week by the CompTel/ASCENT, a Washington, D.C.-based trade group.

State regulators stressed yesterday that the rate change affects wholesale rates, not the retail rates charged customers.

"This is not going to affect competition significantly in the state," Butler said.

Anthony Centrella, director of the BPU's division of telecommunications, said profit margins are sufficient enough to absorb the wholesale increase. "New Jersey is a very profitable market," he said.

But in a statement yesterday, AT&T, while 'relieved' that the BPU rejected Verizon's higher rate request, indicated that it may raise rates to consumers.

"As in any rational business, AT&T expects that it will have no choice but to pass this wholesale cost increase onto its customers and hopes that the board's decision will not negatively affect consumer choice and competition in the state," said Mike Morrissey, AT&T's vice president, law and government affairs.

New Jersey Citizen Action, a consumer group, criticized the BPU for allowing Verizon to increase wholesale rates.

"Originally when residents and small businesses called for lower rates and more choices in their phone service, the BPU got the message," said Steve Bonime, an organizer. "But now, it has hung up on consumers."

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